Comments on: An Insiders Tale: Why Banks are Tightening on Real Estate Investments

By: Eric in Silicon Valley

Eric in Silicon Valley — Sun, 07 Feb 2010 06:14:25 +0000

The other day I got a flyer in the mail for what was called an SBA (Small Business Administration) Express Loan. I don’t know the details, but they suggested that small businesses might get a credit line up to $50k, unsecured, with minimal paperwork. I looked this up online, and it seems that all the big banks are promoting this.

We know the current administration is trying to push the love down to small businesses after the big business have been supported. I’m trying to make sense of the big picture but am having trouble. Are small businesses in general being encouraged, while real estate in particular is a lending red flag?

By: Peter Giardini

Peter Giardini — Tue, 02 Feb 2010 06:39:27 +0000

John… and regrettably… it seems we can’t fix stupid!

By: Peter Giardini

Peter Giardini — Tue, 02 Feb 2010 06:38:26 +0000

Trent… yes the hard and private lenders are in a great position to step in where the soft lenders won’t… and be richly rewarded in the process.

I believe that is what they call capitalism in action!

By: Peter Giardini

Peter Giardini — Tue, 02 Feb 2010 06:37:11 +0000

Ted… we are in for some interesting times and the lenders aren’t sure what to do… whenever there is confusion in the market… it will freeze. Hey, I’m not a genius, but if could figure that out you would think some brainiac in the government would.

By: Ted Akers

Ted Akers — Mon, 01 Feb 2010 19:58:40 +0000

Very appropriate comment by Matt. The Fed has definately been holding rates down. It could get even more interesting if China finds an economy starting to grow that it likes better or decides for any reason that they no longer wish to be the largest holder of our treasuries. Regardless of how strong we have been, the national debt is a LARGE pill to swallow.

By: matt mathews

matt mathews — Mon, 01 Feb 2010 19:43:02 +0000

Excellent Post John,
Having spent part of my career as VP during the S&L crises, the one thing that stands out in comparison with today’s market is what I call the “Who Done It Factor”. Blame game legislation to protect the consumer from all of us bad guy Investor/speculators. Little by little Green shuts are appearing, however, because the Feds know that although we were part of the melt down problem we are also the only ones that have the capacity to bring back and save the market. It will truly be interesting to see what happens when the Federal Reserve stops buying up all the secondary market mortgages in March. Thanks again for a great post John.
.-= matt mathews´s last blog ..California posts nation’s largest foreclosure total in 2009 – Los Angeles Business from bizjournals: =-.

By: John

John — Mon, 01 Feb 2010 15:51:00 +0000

This is the best we can do? I am continually amazed at the amount of dumb decisions that come out of the government-who just happens to have all the resources. Foreclosure on performing loans rather than extend? Stupid

By: Trent Dalrymple

Trent Dalrymple — Mon, 01 Feb 2010 00:34:35 +0000

Your article reinforces why private and hard money lenders such as myself are in such demand. For the reasons you wrote about, the market has forced us into a niche in hard money lending, we only finance real estate investors to purchase and rehab houses in and around Detroit and sell these Notes to private investors, many using their self-directed IRA’s. Unlike hard money of the past we now expect higher credit scores, provable income and the exit strategy must be in place to refinance or sell. Our LTV is only 50% based on after-repair-value and our terms are only 13 months, but unlike your bank we can extend the term and not foreclose. Many investors ask why would anyone pay the higher rate and fees if they qualify for conventional financing? My response has been simply, no one else will lend to investors in these cases regardless of the quality of the borrower or how much the deal makes sense. As always, when institutions cripple the market with unwavering and shortsighted actions the private sector will have to step up to take their place.

Hard Money isn’t cheap, but cheap money is no good if you can’t get it.

By: Ted Akers

Ted Akers — Sun, 31 Jan 2010 23:55:51 +0000

This is an excellent post. I have heard from two bankers that even though the administration is encouraging an expansion of current lending levels regulators are putting the hammer down. The Treasury Departments program of purchasing both treasuries and MBS is winding down. It has helped to keep mortgage rates artificially low, and the day of reckoning and noticeably higher rates not too far in the future could be painful.

By: Peter Giardini

Peter Giardini — Sun, 31 Jan 2010 19:34:56 +0000

Josh,

Thanx… this means a lot…

Pete

By: Peter Giardini

Peter Giardini — Sun, 31 Jan 2010 19:34:18 +0000

Your first comment is right on the money. I didn’t mention that point in my post… but the regulators want lenders to look at “global” cash flow. Meaning how many properties are owned and what is the possibility that if one property heads south… it will pull all of them down.

And yes… we are in for a rude awakening in the next 6 – 9 months.

By: Peter Giardini

Peter Giardini — Sun, 31 Jan 2010 19:31:51 +0000

Rational thought… what the heck is that. It seems everything that the government is doing is contrary to actually improving things.